Profit falls at UK's Sainsbury's for third straight year

Delia Watkins
May 4, 2017

Indeed, its profits could have been lower in a year in which Sainsbury's has had to invest heavily in cutting prices, but they were bolstered by cost savings of £130 million and a £77 million contribution from Argos, the catalogue retailer that it bought for £1.4 billion last year.

Sainbury's, Britain's second-largest supermarket, said full year underlying profits before tax came in at £581 million, marginally higher than the £578 million tally anticipated by analysts but down 1% from the previous fiscal year.

That was as good as it got - the best performance by Sainsbury's in three years, but the bar set pretty low in a hard period for food retailers as discounter competitors and deflation have stalked the aisles.

Mr Coupe insisted its food business remained "resilient in a challenging market".

"Our job is to build a business for the future", said Chief Executive Mike Coupe, who outlined his strategy for the business two and a half years ago.

"We are therefore accelerating our plan to open a total of 250 Argos Digital stores in Sainsbury's supermarkets and will deliver our £160m EBITDA synergy target by March 2019, six months ahead of schedule".

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Neil Wilson, senior market analyst at ETX Capital wrote in a note, "Not a great set of numbers from Sainsbury's this morning but largely in line with expectations".

Data from the researcher Kantar Worldpanel showed on Wednesday that as well as lagging behind the growth of the cut-price grocers Aldi and Lidl, Sainsbury's food sales are also trailing rivals Tesco and Morrison's.

Shares in Sainsbury's were down 5 percent at 265.5 pence at 1034 GMT, valuing the business at 5.8 billion pounds and taking the year on year decline to almost 7 percent. It also increased sales and market share in new and growing categories such as On the Go, launched in September 2016, which included sandwiches with meat and vegetable fillings.

"The market place this year has been one of the most interesting, challenging and volatile that I've ever experienced in my working lifetime. Economic commentators are divided on the implications for the United Kingdom economy, but there are fears that this slowdown in real income might drive a reduction in GDP growth, an increase in unemployment and a reduction in the rate of unsecured credit growth", the company said in a statement.

"The group may be going well in clothing and general merchandise but within the core food element of the supermarket estate it is struggling to build sales".

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